Sempra executes on five value creation initiatives in 2025

Submitted by sempra_ian on Thu, 03/27/2025 - 23:21

“Together, we are powering our potential for sustained growth and a brighter future.”

This is Chairman and CEO Jeffrey Martin’s comprehensive letter to shareholders included in our 2024 annual report.

Sempra CEO Jeffrey Martin As we turn the page to a new fiscal year, I am proud of our 2024 accomplishments and continued progress in positioning Sempra for exciting opportunities ahead. Our industry is in the early innings of a strong cycle of growth. Across North America, economic expansion and rising electricity demand have led us to this critical juncture – one that calls on our industry to further invest in energy infrastructure and execute at scale to expand, modernize and improve the safety of the energy networks our communities and customers depend on.

The growth narrative for energy infrastructure is compelling. It is estimated that America will need to invest over $600 billion in transmission and distribution infrastructure through 2030 to meet rising demand for energy. We believe that forecast will likely prove to be conservative. In the State of Texas, for example, regulators expect electricity demand will nearly double by 2030. Those estimates are underpinned by expected population and economic growth, including significant growth in large energy users being connected to the energy grid.

Over the last several years, we have taken action to prepare our company for these positive industry trends and lay the groundwork for growth by building critical scale in some of the largest economic markets in North America. In addition, we have narrowed our investment focus to the higher growth and lower risk segments of the energy value chain, while navigating near-term challenges. Earlier this year, Sempra lowered its earnings-per-common share guidance for 2025 to appropriately account for regulatory rulings that fell short of our forecasted plans, as well as anticipated impacts of a potential new rate case filing in Texas. Even so, we remain confident in Sempra’s ability to grow and create significant long-term value for the benefit of our owners, customers and other stakeholders.

Today, California is the No. 1 economy in the U.S. with Texas ranked No. 2. Importantly, we have a significant position as an infrastructure leader in both markets. Turning to the global energy market, the U.S. is fortunate to have abundant natural gas resources and currently leads the world in the export of liquefied natural gas (LNG). At Sempra Infrastructure, our non-U.S. utility segment, we own, operate and develop export terminals that help America’s natural gas producers’ source foreign markets, while at the same time supporting America’s allies around the world who are looking to American leadership to improve their energy security.

Sempra is poised to capture new opportunities in each of these areas. That’s why we recently raised our five-year capital plan to a company record of $56 billion.¹ Every day we are powering potential across North America, while addressing important energy challenges with an innovative spirit, unwavering optimism and confidence in our collective strength to deliver value for our shareholders and other stakeholders.

Delivering Results

In 2024, we continued to execute our disciplined growth strategy, backed by a team of problem solvers committed to delivering safe, reliable and cleaner energy to the nearly 40 million consumers we serve.

Sempra Texas

Sempra Texas’ Oncor Electric Delivery Company LLC (Oncor) experienced unprecedented growth and a portfolio of new opportunities to deploy new capital. Highlights include:

15% rate base growth from 2023 to 2024;²
Broad economic expansion and population growth across its service territory, as demonstrated by Oncor’s recently announced $36 billion, five-year capital plan;³
Approval from the Public Utility Commission of Texas of its System Resiliency Plan, which includes nearly $3 billion of capital expenditures and over $500 million in incremental operations and maintenance expenses designed to reduce risk; and
Expanded its energy network to support significantly higher electricity demand while prioritizing safety, reliability and improved financial returns.

2024 Financial Performance

GAAP earnings of $2.82 billion

Assets of nearly $100 billion

$56 billion in utility rate base, with year-over-year increase of ~12%²

Continued 15 consecutive years of dividend increases

Delivered total shareholder return of 21%

Sempra California

In California, San Diego Gas & Electric and Southern California Gas Company continued their focus on serving 25 million consumers safely and reliably. Highlights include:

Opening a new Wildfire and Climate Resilience Center to promote public safety by mitigating the risk of wildfires and supporting research, development and implementation of innovative solutions;
Receiving final decisions from the California Public Utilities Commission on their general rate cases, centering on improving safety and reliability in alignment with California’s energy goals; and
Working with policymakers and other stakeholders to prioritize infrastructure investments that support a growing economy and the state’s energy policies, including improved affordability of utility services.

Sempra Infrastructure

Sempra Infrastructure continued to strengthen the value proposition of its LNG infrastructure franchise. Highlights include:

Solid operational performance at Cameron LNG Phase 1 loading 193 cargoes in 2024;
Significant progress constructing Energía Costa Azul LNG (ECA) Phase 1, Port Arthur LNG Phase 1 and the associated Port Arthur Louisiana Connector pipeline;
Achieving commercial operations at the Gasoducto Rosarito pipeline expansion project with a view toward transporting natural gas to ECA in the future; and
Advancing the Port Arthur LNG Phase 2 development project:
- Entered into fixed-price engineering, procurement, and construction contract with Bechtel Energy, providing the opportunity for a continuous construction process from Phase 1 to the future development of Phase 2 and
- Signed a non-binding heads of agreement with a subsidiary of Saudi Aramco, contemplating purchase of 5 million tonnes per annum of LNG and a 25% equity stake in the project.

Looking Ahead

We see an exciting opportunity to execute on a decisive decade of growth. To do that, Sempra’s corporate strategy centers on five value-creating initiatives in 2025 designed to continue simplifying Sempra’s business model, mitigating risk and improving financial strength. We expect these initiatives to enhance our ability to deliver improved earnings growth and drive enhanced benefits for customers and communities across our service territories.

These five value-creating initiatives target three key outcomes:

1. First, by continuing to simplify our business model and divesting non-core assets, it allows the company to recycle proceeds into new utility investments in Texas and California.

2. Second, they aim to improve the quality and affordability of Sempra’s services, while maintaining the company’s investment grade credit and efficiently funding growth.

3. And finally, these initiatives are designed to reward our owners with improved visibility to consistent growth in earnings and cash flows and long-term value creation.

As we continue growing our asset base to meet higher demand for our services, it is important to thank our talented employees. Their dedication to our mission to be North America’s premier energy infrastructure company makes all the difference as we chart a path to rewarding our owners, customers and other stakeholders.

Finally, I also want to express my appreciation for the feedback we have received from our shareholders. Thank you for placing your trust in our team by supporting our mission. We remain committed to working tirelessly each day to deliver on the opportunities before us, while exceeding your high expectations.

Jeffrey W. Martin
Chairman and CEO

Explore the full 2024 annual report

Sempra’s 2025-2029 capital plan (i) includes Sempra’s proportionate ownership interest in projected capital expenditures at unconsolidated equity method investees while excluding Sempra’s projected future contributions to those equity method investees and (ii) excludes noncontrolling interests’ proportionate ownership interest in projected capital expenditures at Sempra and at unconsolidated equity method investees. All projects in progress and future projects are subject to a number of risks and uncertainties. Sempra’s capital plan and expectations regarding potential increases to its capital requirements are based on a number of assumptions, the failure of which to be accurate could materially impact Sempra’s actual capital expenditures. Sempra’s capital plan is considered by management to be an operating measure.
Sempra California rate base of $29B is the value of assets on which San Diego Gas & Electric Company and Southern California Gas Company are permitted to earn a specific rate of return in accordance with rules set by regulatory agencies and is calculated using a 13-month weighted-average, excluding construction work in progress, in accordance with California Public Utilities Commission methodology as adopted in rate-setting proceedings. Sempra Texas rate base of $27B includes 100% of Oncor and Sharyland Utilities, L.L.C. and represents total estimated invested capital, as adjusted in accordance with Public Utility Commission of Texas rules, at the end of the previous calendar year, as reported in the Earnings Monitoring Report filed with the PUCT on an annual basis.
Reflects 100% of Oncor’s 2025 – 2029 capital plan.
Reflects Sempra’s projected capital investments for 2025 within its 2025-2029 capital plan.
Includes, among other things, the potential sale of a minority interest in Sempra Infrastructure Partners.

This article contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions about the future, involve risks and uncertainties, and are not guarantees. Future results may differ materially from those expressed or implied in any forward-looking statement. These forward-looking statements represent our estimates and assumptions only as of the date of this article. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise.

In this article, forward-looking statements can be identified by words such as “believe,” “expect,” “intend,” “anticipate,” “contemplate,” “plan,” “estimate,” “project,” “forecast,” “envision,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “construct,” “develop,” “opportunity,” “preliminary,” “initiative,” “target,” “outlook,” “optimistic,” “poised,” “positioned,” “maintain,” “continue,” “progress,” “advance,” “goal,” “aim,” “commit,” or similar expressions, or when we discuss our guidance, priorities, strategies, goals, vision, mission, projections, intentions or expectations. Factors, among others, that could cause actual results and events to differ materially from those expressed or implied in any forward-looking statement include: California wildfires, including potential liability for damages regardless of fault and any inability to recover all or a substantial portion of costs from insurance, the wildfire fund established by California Assembly Bill 1054, rates from customers or a combination thereof; decisions, denials of cost recovery, audits, investigations, inquiries, ordered studies, regulations, denials or revocations of permits, consents, approvals or other authorizations, renewals of franchises, and other actions, including the failure to honor contracts and commitments, by the (i) California Public Utilities Commission (CPUC), Comisión Reguladora de Energía, U.S. Department of Energy, U.S. Federal Energy Regulatory Commission, U.S. Internal Revenue Service, Public Utility Commission of Texas and other regulatory bodies and (ii) U.S., Mexico and states, counties, cities and other jurisdictions therein and in other countries where we do business; the success of business development efforts, construction projects, acquisitions, divestitures, and other significant transactions, including risks related to (i) being able to make a final investment decision, (ii) completing construction projects or other transactions on schedule and budget, (iii) realizing anticipated benefits from any of these efforts if completed, (iv) obtaining third-party consents and approvals and (v) third parties honoring their contracts and commitments; changes to our capital expenditure plans and their potential impact on rate base or other growth; litigation, arbitration, property disputes and other proceedings, and changes (i) to laws and regulations, including those related to tax and the energy industry in Mexico, (ii) due to the results of elections, and (iii) in trade and other foreign policy, including the imposition of tariffs by the U.S. and foreign countries; cybersecurity threats, including by state and state-sponsored actors, of ransomware or other attacks on our systems or the systems of third parties with which we conduct business, including the energy grid or other energy infrastructure; the availability, uses, sufficiency, and cost of capital resources and our ability to borrow money or otherwise raise capital on favorable terms and meet our obligations, which can be affected by, among other things, (i) actions by credit rating agencies to downgrade our credit ratings or place those ratings on negative outlook, (ii) instability in the capital markets, and (iii) fluctuating interest rates and inflation; the impact on affordability of San Diego Gas & Electric Company’s (SDG&E) and Southern California Gas Company’s (SoCalGas) customer rates and their cost of capital and on SDG&E’s, SoCalGas’ and Sempra Infrastructure’s ability to pass through higher costs to customers due to (i) volatility in inflation, interest rates and commodity prices, (ii) with respect to SDG&E’s and SoCalGas’ businesses, the cost of meeting the demand for lower carbon and reliable energy in California, and (iii) with respect to Sempra Infrastructure’s business, volatility in foreign currency exchange rates; the impact of climate policies, laws, rules, regulations, trends and required disclosures, including actions to reduce or eliminate reliance on natural gas, increased uncertainty in the political or regulatory environment for California natural gas distribution companies, the risk of nonrecovery for stranded assets, and uncertainty related to emerging technologies; weather, natural disasters, pandemics, accidents, equipment failures, explosions, terrorism, information system outages or other events, such as work stoppages, that disrupt our operations, damage our facilities or systems, cause the release of harmful materials or fires or subject us to liability for damages, fines and penalties, some of which may not be recoverable through regulatory mechanisms or insurance or may impact our ability to obtain satisfactory levels of affordable insurance; the availability of electric power, natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid or pipeline and storage systems or limitations on the injection and withdrawal of natural gas from storage facilities; Oncor Electric Delivery Company LLC’s (Oncor) ability to reduce or eliminate its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor’s independent directors or a minority member director; and other uncertainties, some of which are difficult to predict and beyond our control.

These risks and uncertainties are further discussed in the reports that Sempra has filed with the U.S. Securities and Exchange Commission (SEC). These reports are available through the EDGAR system free-of-charge on the SEC's website, www.sec.gov, and on Sempra’s website, www.sempra.com. Investors should not rely unduly on any forward-looking statements.

Sempra Infrastructure, Sempra Infrastructure Partners, Sempra Texas, Sempra Texas Utilities, Oncor and Infraestructura Energética Nova, S.A.P.I. de C.V. (IEnova) are not the same companies as the California utilities, SDG&E or SoCalGas, and Sempra Infrastructure, Sempra Infrastructure Partners, Sempra Texas, Sempra Texas Utilities, Oncor and IEnova are not regulated by the CPUC.